This article is part of Executive’s special report on the oil and gas sector. Read more stories as they’re published here, or pick up October’s issue at newsstands in Lebanon.
Like skinning the proverbial cat, there are many ways a state can earn money from oil and gas resources. A government’s goal in negotiating an oil and gas deal with international companies is to maximize its share of revenues. While states were once content to give oil and gas companies control over and ownership of hydrocarbons in exchange for a cut of the profits, the times began a-changin’ in 1966. That year, Indonesia reversed the state–petroleum company relationship, prompting the nationalization of resources in countries around the world. Indonesia signed the first major production sharing agreement (or contract, the terminology differs but the idea is the same) the most important innovation of which was that the state owns the resources.